Express Carriers: Getting Interesting
- Express Carriers Long Out of Favor: We have covered Fedex and UPS for a really long time and have not been interested in them for a really long time. However, recent underperformance (i.e. valuation improvement) and a better cyclical set up is starting to make the group look more promising.
- Capacity Reductions?: Fedex appears to have added excess express capacity after the financial crisis and may announce its withdrawal at its October analyst meeting. That capacity reduction, among other factors, could be a help to industry utilization and margins.
- USPS Contract Up: We also note that the Fedex USPS contract is up for grabs now. UPS has a bid in. It’s a ~$1 billion in revenue with above average margins, so it moves the needle – down for FDX if it loses the business.